Market Data 
Shopee, the e-commerce arm of Sea Limited (NYSE:), implemented an increase in merchant commission rates across seven countries. This move, effective since July 2024, is part of a broader trend among e-commerce platforms to enhance profitability and industry discipline.
Notably, in Indonesia, the change took effect from September 1, 2024. This strategic shift is expected to bolster Shopee’s unit economics, particularly through its live streaming services, with projections indicating an improvement in its core marketplace take rate from 7.6% in the second quarter of 2024 to 7.8% by the fourth quarter.
Garena, another Sea Limited subsidiary, has also seen a positive revenue trend, with data from Sensor Tower indicating a 20% increase in daily gaming revenue in the third quarter of 2024 compared to the second quarter.
This growth is attributed to investments made to enhance the in-game experience of its flagship game, Free Fire. Consequently, Garena’s Non-GAAP revenue is forecasted to rise by 9% year-over-year to $487 million in the third quarter of 2024.
The e-commerce platform’s commission rate hikes follow similar moves by competitors Lazada and TikTok Shop, reflecting a collective focus on profitability within the industry.
Shopee’s higher fees compared to its peers underscore its market leadership and competitive edge, supported by the largest user and merchant base among the platforms.
The financial outlook for Sea Limited remains strong, with HSBC reiterating a Buy rating on the company’s stock and maintaining an unchanged price target of $96.
The firm anticipates Sea’s adjusted EBITDA to more than double to $2.5 billion by 2025, driven by Shopee’s improved unit economics and SeaMoney’s projected EBITDA compound annual growth rate of 17% from 2023 to 2026. This growth is expected to be fueled by an expanding loan book and a growing user base.
The strategic adjustments made by Shopee, including commission rate increases and investments in live streaming and customer service, are expected to accelerate its gross merchandise volume growth to 24% year-over-year in 2024 and strengthen its competitive position in the e-commerce sector.
Sea Limited’s stock currently trades at 19.2 times its projected 2025 enterprise value to EBITDA, with the price target set at a multiple of 23.8.
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